Avoiding a Dividend Stock in the Dow Index Today
Dow Inc., one of the world's leading chemical companies, is bracing for the release of its Q3 2025 earnings results, expected to be announced around late October. The company's earnings per share (EPS) and revenue details are yet to be disclosed, but analysts predict a similar timeline to that of major competitors like ExxonMobil, who are set to announce their Q3 results on October 24.
However, the current market conditions present a challenge for Dow Inc. Pricing weakness outpaces cost savings, causing margin pressure for the company, a situation that was highlighted in the company's own commentary in July. This has led to a 50% reduction in Dow Inc.'s quarterly dividend, from $0.70 to $0.35 per share, a move aimed at preserving cash and providing flexibility to navigate a tough environment.
The dividend reduction, announced on July 24 during the company's second-quarter earnings call, has not alleviated the headwinds that led to the reduction in the first place. Some analysts argue that Dow Inc. should have suspended the dividend entirely to reset expectations and conserve more cash.
Despite the higher yield, Dow Inc.'s sales were down 7% year over year companywide and across all business units as of July. The company cited geopolitical headwinds, tariffs, weak global demand, margin pressure, execution challenges, and limited visibility into recovery as factors contributing to the decline.
As the upcoming October 23rd Q3 earnings report approaches, it will serve as an important first checkpoint for Dow Inc. The first test to prove whether Dow's dividend-fueled turnaround is real or fleeting will be the release of third-quarter results. It will take multiple milestones and quarters of progress before Dow Inc. can be considered a stable income play again.
For now, Dow Inc.'s current dividend yield of approximately 5.8% is higher than the broader S&P 500's 1.2%, making it an attractive option for income-focused investors. However, the risks still outweigh the potential reward, and conservative investors should resist the urge to chase the yield.
The stock of Dow Inc. has seen a 20% rebound over the past two weeks, but it is still about $5-or 20%- below the $30 level it was trading at prior to the dividend reduction. Until there's evidence of demand recovery, pricing improvement, earnings stability, and more, it's advisable for investors to exercise patience when it comes to Dow Inc.
For true income-focused portfolios, it may be prudent to avoid Dow Inc. until the company demonstrates a clear path to recovery and stability. The uncertainty surrounding the next upturn in the chemical industry, whether it arrives in six months or two years, adds to the risks associated with investing in Dow Inc. at this time.
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